Agricultural benefit policy red packet is optimistic about seed feed vaccine

This year, the overall performance of agricultural units is stronger than that of the market, and many high-level meetings recently, such as the Central Rural work Conference and the Symposium on Modern seed Industry, are closely related to agricultural development. Compared with previous years, what are the new opportunities for the agricultural sector in the future? Which sub-sectors can be focused on? In response, a reporter from the Securities Times interviewed Xie Zhigang, manager of the Haifutong pension income mixed fund, and Xie Gang and Zhang Junyu, number one in the "New Fortune" agriculture, forestry, animal husbandry and fishing industry and researcher of Qilu Securities in 2013.

Performance release plus policy catalysis

Agricultural stocks rose in the second half of the year.

Securities Times reporter: in the second half of the year, agricultural stocks substantially outperformed the market, what are the main reasons?

Xie Zhigang: the growth rate of income and profits in the agricultural sector has declined since mid-2012, and the industry continues to be depressed in the first half of 2013. Since the third quarter, the net profit and growth rate of the industry have rebounded significantly compared with the previous quarter, and the performance of listed companies has begun to release. Policy has also repeatedly mentioned strong support for agriculture, including encouraging capital investment in agriculture, marketization of agricultural prices, promoting land system reform, ensuring food security, and so on. Performance release combined with policy catalysis laid the foundation for the rise of agricultural stocks. In addition, the agricultural sector is almost in the middle of small-cap stocks, and the overall trend of small-cap stocks is better than that of large-cap stocks so far this year. These three factors make agricultural stocks outperform the market this year.

Xie Gang and Zhang Junyu: the performance of agricultural stocks was slightly weaker or flat than the market in the first half of the year, and it obviously outperformed the market from July to October, mainly for two reasons: first, the prosperity of the entire industry has improved since the second quarter, which has brought about an improvement in performance compared with the previous quarter; second, since September and October, the market has a strong expectation of policies in the agricultural industry, and the valuation of agricultural stocks has been significantly boosted.

Large-scale development into a trend

Reporter from the Securities Times: on December 24, the Central Rural work Conference closed. In the evening, Vice Premier Wang Yang presided over a symposium on poverty alleviation and development and modern seed industry. What kind of policy tone does this reveal? Is there a greater opportunity for the seed industry?

Xie Zhigang: from this Central Rural work Conference, we can see that the current government attaches great importance to agriculture. Seed industry is a basic and strategic core industry in China, and its positioning has been further strengthened in 2011. The support of the policy to the seed industry will certainly be conducive to the development of the industry in the long run. On the one hand, the state supports land transfer, and the downstream ability to identify seeds and service quality is greatly improved, which is conducive to dominant varieties and leading enterprises to expand market share. On the other hand, the Ministry of Agriculture supports the merger and reorganization of seed enterprises, and the degree of market concentration has been enhanced.

Xie Gang and Zhang Junyu: the Central Rural work Conference has a far-reaching impact on the agricultural sector. The meeting set the main tone of putting food security at the core, and ensuring food security has two implications: first, to ensure an absolute increase in output, to ensure national supply, to maintain a relatively high self-sufficiency rate, and to reduce external dependence; and second, to ensure food safety.

The main tone of agricultural development is scale, specialization and modernization, and continue to be optimistic about the trend of large-scale development of planting and aquaculture in the future. For example, the upstream supporting industries, feed, seeds, pesticides, chemical fertilizers, veterinary drugs and other enterprises, government support will continue to increase, and bring industry concentration.

This high-profile meeting on seeds can be seen as a major epoch-making change. The meeting made it clear that scientific research institutions will withdraw from the field of commercialization completely by 2015. In the next two years, there will be a great integration of the whole industry, and the core technical personnel separated from scientific research institutions will join seed enterprises, and the R & D strength of seed companies will be greatly improved. In addition, strengthening the protection of intellectual property rights and cracking down on fake and shoddy varieties will double the space for genuine seeds in the future.

Be optimistic about seed feed vaccine

Securities Times reporter: based on the food security strategy, land transfer and modern agriculture and other strategies, what new opportunities may emerge in the agricultural sector?

Xie Zhigang: the policy-driven agricultural development model is accelerated and upgraded, and it is expected to benefit the agricultural sector in the medium to long term. Seed, feed, vaccine and other efficiency-enhancing sub-industries are expected to benefit from agricultural reform policies. Whether it is the development of sustainable agriculture, the reform of land system, or the reform of scientific research mechanism of seed industry, the primary goal is to improve the efficiency of agricultural production. Therefore, in the medium and long term, it is good for enterprises that sell seeds, feed, vaccines and other means of production, as well as large-scale breeding companies.

Xie Gang and Zhang Junyu: the main opportunity is first of all reflected in the land transfer. New business models will appear in related enterprises in the future. judging from the current situation, the planting efficiency and large-scale operation of the planting industry are not mature, and some enterprises are trying to innovate in the business model. High-end integration of planting, processing and sales may become a major direction. In addition, the combination of eco-agricultural cultivation and rural real estate may also become a major model. In addition, under the trend of large-scale development of planting and breeding in the present generation, upstream supporting enterprises, such as pesticides, seeds, chemical fertilizers, veterinary drugs and feed, will change from selling products to selling services. enterprises that can provide high-quality services can better enjoy the benefits of modern agricultural scale development. For example, leading enterprises such as feed and veterinary drugs are likely to achieve an annual growth rate of 30% to 40% in the next three to five years.

Securities Times reporter: bird flu strikes again, when will poultry breeding take a turn for the better? Is the current animal vaccine industry worthy of attention?

Xie Zhigang: bird flu will certainly affect the poultry breeding industry, but at present, the impact of bird flu on the plate is limited. How it will evolve in the future also depends to some extent on the scope of the virus's influence, so it is difficult to predict.

In the medium to long term, opportunities for vaccines also stem from the increase in large-scale farmers. In recent years, the increase of large-scale farmers has led to an increase in the demand for livestock vaccine and the expansion of the market scale; at the same time, the demand structure of large-scale farmers for vaccine has also shown a trend of upgrading. Therefore, the impact on the vaccine market is a two-way positive impact on scale and structure.

Xie Gang Zhang Junyu: This year's poultry farming boom is worse than that of pigs. The main reason is that in April this year, affected by avian influenza, the market demand for poultry meat declined. In the second and third quarters of this year, poultry stocks declined significantly, and the supply end contracted. Whether or not the industry can recover next year depends on how much the impact of bird flu is. If the impact of avian influenza ends next year, poultry demand may increase significantly, and the recovery of prosperity may be significantly greater than that of pigs.

At present, the animal vaccine industry is optimistic. The main reason is that under the background of large-scale breeding promotion, large-scale farmers attach more importance to vaccines, the cost investment is also increasing, and the demand for the whole veterinary drug and veterinary vaccine increases. In the past five years, the veterinary drug industry has increased by about 15% every year. We are optimistic about the market promotion prospect of veterinary vaccine, especially in the market promotion of pig blue ear and foot and mouth disease vaccine in the subdivided fields. As these two seedlings are in the initial stage, it is estimated that the annual compound growth rate may reach 50% in the next few years.

Short-term adjustment needs exist

Securities Times reporter: How do you see the current agricultural plate related valuation?

Xie Zhigang: The recent valuation of agricultural plate has fully reflected expectations, and there is a certain adjustment demand.

Xie Gang Zhang Junyu: According to the dynamic P/E ratio in 2014, the P/E ratio corresponding to feed sub-industry is about 20 times, seed is about 30 times, vaccine is about 25 times, the valuation is relatively reasonable, and there is room for further improvement in the future.

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